FEDERAL ELECTION COMMISSION WASHINGTON. DC 20463 SENSITIVE November 20,1998 Benjamin L. Ginsberg, Esquire Donald F. McGahn 11, Esquire Patton Boggs, L.L.P. 2550 M Street, NW Washington, DC 20037-1350 RE: MURs 43 17 and 4323 The Huckabee Election Committee (US.Senate) Prissy Hickerson, as treasurer The Huckabee Election Committee Prissy Hickerson, as treasurer The Honorable Mike Huckabee Dear Mr. Ginsberg and Mr. McGahn: Based on complaints filed with the Federal Election Commission on March 4 and 8, 1996, and on information supplied by your cfients, the Commission, on October 16, 1996, found there was reason to believe that in MUR 4317 the Huckabee Election Committee (U.S. Senate) (“the Senate Committee”) and Prissy Hickerson, as treasurer, had violated 2 U.S.C. $9 434(b)(3)(A) and 441 b. On the same date the Commission also found reason to believe in MUR 4323 that the Senate Committee and Prissy Hickerson, as treasurer, had violated 2 U.S.C. $$ 434(b)(3)(A) and 44 ib; that the Huckabee Election Committee (“the State Committee”) and Prissy Hickerson, as treasurer, had violated 2 U.S.C. 8 44Ib; and that the Honorable Mike Huckabee had violated 2 U.S.C. 5 441b. The Commission instituted an investigation of these matters. After considering all the evidence available to the Commission, the Office of the General Counsel is prepared to recommend that the Commission find probable cause to believe that violations have occurred. The Commission may or may not approve the General Counsel’s recommendation. Submitted for your review is a brief stating the positions of the General Counsel on the legal and factual issues of these matters. Within 15 days of your receipt of this notice, you may file with the Secretary of the Commission a brief (ten copies if possible) stating your positions on the issues and replying to the brief of the General Counsel. (Three copies of such brief should also be forwarded to the Office of the General Counsel, if possible.) The General Counsel‘s brief and 2 MURs 43 17 and 4323 Benjamin L. Ginsberg, Esquire Donald F. McGahn 11, Esquire any brief which you may submit will be considered by the Commission before proceeding to votes of whether there is probable cause to believe violations have occurred. If you are unable to file a responsive brief within 15 days, you may submit a written request for an extension of time. All requests for extensions of time must be submitted in writing five days prior to the due date, and good cause must be demonstrated. In addition, the Office of the General Counsel ordinarily will not give extensions beyond 20 days. A finding of probable cause to believe requires that the Office of the General Counsel attempt for a period of not less than 30, but not more than 90 days, to settle these matters through a conciliation agreement. Should you have any questions, please contact Anne A. Weissenborn, the Acting Assistant General Counsel assigned to this matter, at (202) 694-1650. Sincerely, General Counsel Enclosure Brief BEFORE THE FEDERAL ELECTION COMMISSION In the Matter of 1 ) 1 Huckabee Election Committee (U.S. Senate) 1 MUR 4317 and MUR 4323 Prissy Hickerson, as treasurer 1 Huckabee Election Committee ) Prissy Hickerson, as treasurer ) The Honorable Mike Huckabee 1 GENERAL COUNSEL’S BRIEF I. STATEMENT OF THE CASE On October 16, 1996, the Commission found reason to believe in MUR 43 17 that the .. ... .. Huckabee Election Committee (U.S. Senate) and Prissy Hickerson, as treasurer, (“the Senate :=$, ...-..~ ... Committee”) violated 2 U.S.C. $441b by accepting a contribution from the Delta Beverage Group, Inc., and 2 U.S.C. Q 434(b)(3)(A) by mis-reporting the sources of two contributions. In MUR 4323 the Commission found reason to believe that the Huckabee Election Committee and Prissy Hickerson, as treasurer, (“the State CQmmittee”) violated 2 U.S.C Q 441b by making in-kind contributions to the Senate Committee using impermissible funds, that the Senate Committee violated 2 U.S.C. Q 441b by accepting these in-kind contributions, and that the Honorable Mike Huckabee also violated 2 U.S.C. Q 441b as a result of his involvement in the activities at issue. Further, the Commission found reason to believe that the Senate Committee violated 2 U.S.C. $ 434(b)(3)(A) by failing to identify fully all contributors itemized on its 1995 Year End Report. 2 11. ANALYSIS a. MUR4317 The Federal Election Campaign Act of 1971, as amended, (“the Act”), prohibits corporations, labor organizations and national banks from making contributions to federal candidates and political committees, and political committees from knowingly accepting such contributions. 2 U.S.C. 4 441b. 11 C.F.R. 0 103.3(b)(l) provide that, if questions arise as to whether a particular contribution is prohibited by the Act, the recipient political committee may deposit the contribution into its account while the legality of the contribution is investigated. Unless shown to be not prohibited, the contribution must be refunded within thirty days of receipt. The Commission’s reason to believe determination in MUR 43 17 regarding a violation of 2 U.S.C. Q 441b by the Senate Committee involves a contribution of $1,000 from a corporation, Delta Beverage Group, which was received on August 22, 1995, but not refunded until March 1, 1996 and thus not within the thirty day period provided at 11 C.F.R. 0 103,3(b)(l). The response submitted on behalf of the respondents admits this violation, but contends that it was the result of the Senate Committee’s having mistakenly assumed that the contributor was a political action committee, as had been the sources of other contributions from the soft drink industry. This Office intends to recommend that the Commission find probable cause to believe that the Huckabee Election Committee (U.S. Senate) and Prissy Hickerson, as treasurer, violated 2 U.S.C. 441b by accepting this contribution. 2 U.S.C. 0 434(b)(3)(A) requires the identification in committee reports of all persons who have made contributions to the reporting committee in excess of $200. MUR 43 17 also 3 involves the Senate Committee’s mis-reporting of two contributions in the amounts of $500 each. These contributions were made by two partnerships, the Coca-Cola Bottling Company of Fort Smith and Hudson, Cisne, Keeling-Culp & Company, but were reported as having come from particular partners, namely Roger Meek and Richard Cisne respectively. The Senate Committee admits the reporting errors at issue, but cites “incorrect” information received from the contributors as the result of inquiries made by the committee which it then included in amendments to its reports. This Office will recommend that the Commission find probable cause to believe that the Huckabee Election Committee (U.S. Senate) and Prissy Hickerson, as treasurer, violated 2 U.S.C. Q 434(b)(3)(A). b. MUR4323 Arkansas state law pennits contributions to candidates for state office of up to $1,000 per election from corporations, labor organizations and banks. (Arkansas Code Annotated (“A.C.A.”) $ 7-6-203(a) and (b). 11 C.F.R. 9 100.8(a)( 1) defines “expenditure” as including the provision of “anything of value . for purposes of influencing any election for Federal office . .” 11 C.F.R. Q lOO.S(a)( l)(iv)(A) defines “anything of value” as including in-kind contributions. I I C.F.R. Q 100.7(b)(l) and 9 100.8(b)(l) exclude from the definitions of “contribution” and “expenditure” payments made “for the purpose of determining whether an individual should become a candidate;” however, if that individual later becomes a candidate, such contributions or payments become reportable. These same regulatory provisions include as examples of “testing-the- waters” activities the conducting of a poll, travel and telephone costs. 4 11 C.F.R. Q 106.4(e) provides several alternatives for allocating the costs of a poll among political committees benefited. The method most relevant to the present matter would result in “[aJn amount computed by dividing the overall cost of the poll equally among candidates (including State and local candidates) or political committees receiving the results. .” 11 C.F.R. Q 106.4(e)(2). The Commission’s findings of reason to believe in MUR 4323 that the Senate Committee, the State Committee and their treasurers, (together “Respondents”), violated 2 U.S.C. Q 441b were based upon a letter and an accompanying survey mailed by the State Committee in May, 1995; upon the payment by the State Committee of expenses incurred with regard to a trip to Washington, DC by then Lieutenant Governor Mike Huckabee and his assistant, Brenda Turner, in early August, 1995; and upon additional expenditures by the State Committee which appeared to go beyond ones related to retirement of state election-related debt. In their response to the complaint, Respondents argued that these expenditures by the State Committee were for non-federal activities. 1. Letter and Questionnaire The State Committee’s May, 1995 letter contained an appeal for hnds to repay debts remaining from Mr. Huckabee’s 1994 campaign for the office of Lieutenant Governor of Arkansas. This letter included no express reference to a prospective federal campaign; however, enclosed with the letter was a document entitled “Arkansas Citizen Opinion Survey” which was composed often questions which recipients were asked to answer and return to the State Committee with their debt reduction contribution. Question 9 of the survey contained the following language: 5 There has been much speculation about the open U.S.